The Hindu Business Line : AP Cabinet okays fiscal management ordinance

THE Andhra Pradesh Cabinet today approved three ordinances including the one relating to the AP Fiscal Responsibility and Budget Management Act, 2005 to bring in fiscal discipline.

Speaking to newspersons after the State Cabinet meeting, the Chief Minister, Dr Y.S. Rajashekhara Reddy, said that the ordinance was a follow-up to the 12th Finance Commission proposals and seeks to bring in prudent fiscal management and thereby streamline State finances. Some States have already adopted similar enactments.

As a part of the fiscal management drive, the Finance Commission had announced certain debt relief measures that would help save on the cost of debt and provided for certain incentives for better fiscal management.

Saving on debt this year would be about Rs 1,300 crore and Rs 100 crore would be provided as incentive for better management, he said.

The objectives of the ordinance are to eliminate revenue deficit and build up adequate revenue surplus by 2008-2009; pursue necessary policies to raise non-tax revenue to ensure cost recovery and equity; to lay down the principles governing capital expenditure which would lead to growth, equity and welfare.

The draft legislation has been approved by the Reserve Bank of India (RBI) and the Government of India and suits the needs of the State Government in totality, Dr Reddy said.

Another ordinance the Cabinet approved relates to service rules of teachers, both Government and Panchayati Raj, and matters connected to their promotions, while the third relates to expanding the scope of the reference for the AP Commission for Backward Classes Commission.

Referring to the recent controversy about the State Government seeking loans from the World Bank - while criticising the TDP Government for having done the same - Dr Reddy said: "The fact that we are borrowing from them need not be an issue in itself."

The issue actually relates to how such funds are used and whether there are any conditionalities attached to such loans, he added.

"The Congress Government has embarked on a massive development programmes and such loans borrowed from the World Bank would be deployed into capital expenditure."

About some recent reports about the liquor trade policy, Dr Reddy said that the Government has decided to bring down the number of retail outlets to about 6,500 while ensuring that there was no impact on the total revenue from the industry. This would be achieved by hiking the upset price by about 25 per cent.

It may be recalled that the State Government's liquor policy was struck down by the court on the grounds that it sought to increase the number of more outlets.

Therefore, the Government is in the process of finalising its plans for the new policy as the extended deadline for shops expires by end of June 2005.

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